Free shipping – why it’s so worthwhile & what it will actually cost you
While delivery is a major expense for many retailers, both smaller and larger brands continue to play around with the idea of offering free shipping as an incentive to buyers. Don’t think offering free shipping is worth your while? Think again. According to long- and short-term studies, it has been seen that providing free shipping increases consumer spending and boosts overall revenue.
Free shipping throughout the year
Before we dive into the major shopping seasons, let’s take a look at a few figures concerning free shipping throughout the regular sales year.
- An overwhelming 95% of online shoppers agreed that free shipping was a part of their decision to buy.
- 36% of cart abandonment was claimed to be due to high shipping prices. Forrester calculated this number to be closer to 50%.
- Forrester found that retailers saw a 10-20% increase in revenue just by changing their shipping policies to free.
What’s even more interesting is this: Usability Science found that people actually spent more when free shipping was offered than when it was not. Consumers don’t necessarily mind spending money; they just don’t like spending it on something they feel they shouldn’t have to, like shipping.
As a frugal online retailer, you might still have your doubts about offering free delivery. But when it comes to the holidays or other prominent shopping seasons, everything changes. In fact, research has shown that consumers expect the service to be included in their holiday shopping sprees, and if they happen upon a site that does not provide such accommodations, they simply click out.
How much does it really cost?
Depending on a number of factors, retailers can expect a 5%-20% shipping expense range. Factors that affect this difference include:
- Product weight
- Fulfillment center location
- Shipping rates in the area
- Unexpected expenses (customer support, labor, IT)
Smart tricks for making free shipping work for you
Here are a few ideas you can use to make offering this golden incentive really worth your while as an online retailer.
- Offer free shipping…in exchange for email addresses
Retailers spend a lot of money building their customer database, and a good collection can be worth its weight in gold. If you are having a hard time getting those addresses, then work this into your free shipping promotion. It takes ten seconds for someone to fill in their email address, and they’ll do so gladly if it’s one of the steps towards saving on delivery.
- Offer free shipping…as an abandon cart incentive
Cart abandonment is a major issue for online retailers and something we’re constantly trying to combat. One good way to reel customers back in after they’ve left is to offer them a juicy incentive to stay with you. Free shipping is good bait for such customers, especially considering the statistic we mentioned about (the 36% abandonment rate).
- Offer free shipping…to first time customers
Newcomers to your store need a good reason to stay loyal. Offering free shipping on their first order (at the very least) provides a hearty welcome that shoppers will appreciate, and it will get them to come back and test out your store again.
- Offer free shipping…to brand advocates
There are shoppers and then there are SHOPPERS. Brand advocates are consumers with the loudest voices, and they are extremely influential in their niches. Get an advocate on your side, and you can expect a significant increase in traffic and even revenue. Promote your store and grease the wheels with a clever incentive like free shipping to win advocates over to your side.
- Offer free shipping…as a limited-time only offer
Limiting your shipping offer is a cost effective means that enables you to make the offer while still staying within budget. Provide free shipping only during your busiest seasons like Back To School, Christmas, Halloween, Fourth of July, Cyber Monday, and Black Friday. This way, delivery doesn’t take a huge bite out of your revenue, but it does encourage purchasing during these high retail seasons. Free shipping is also a great psychological kick in the pants to get shoppers moving. Nobody wants to miss out on a limited-time offer!
- Offer free shipping…once you’ve shopped around
Don’t just use any shipping service. Find the cheapest options and most competitive rates to keep costs down.
You can also offer free shipping only once a certain amount has been ordered to incentify customers to shop a little more. This is a brilliant method for getting consumers to purchase more with you.
Free shipping has become an expected service for shoppers, and stores that don’t offer this deal during their busy seasons risk losing customers to their competitors who do. Utilize the above tips for making free shipping more worthwhile, and see an increase in overall revenue and lifetime value of new customers.